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CBN to Maintain Forward Guidance as Policy Tool



  • CBN to Maintain Forward Guidance as Policy Tool

Following the Senate’s refusal to consider President Muhammadu Buhari’s nominees to fill the vacancies in the Monetary Policy Committee (MPC), the Central Bank of Nigeria (CBN) has decided to hold on to forward guidance to communicate its monetary policy intentions pending the resolution of the dispute between the legislature and the executive arms of government.

The suspension of confirmation of the nominees by the Senate has made it impossible for the MPC to form a quorum and could, therefore, not meet to take up its role of monetary policy guidance.

A senior central bank official disclosed this yesterday.

Forward guidance is a verbal assurance from a country’s central bank to the public about its intended monetary policy. It attempts to influence the financial decisions of households, businesses and investors by letting them know what to expect from interest rates (to the extent that the central bank can influence those rates). The central bank’s clear messages to the public are one tool for preventing surprises that might disrupt the markets and cause significant fluctuations in asset prices.

The first MPC meeting for 2018, which would have held last month did not hold. But in the absence of the meeting, the CBN had announced its decision to continue to retain the key monetary policy variables as decided by the MPC at its last meeting in November 2017.

The CBN source explained: “There would be forward guidance. The management of the central bank will continue to issue forward guidance.

“If you remember there was a time in this country when MPC wasn’t statutory, the economy was running, and the central bank was issuing forward guidance.

“So, there is no problem, the central bank will continue to issue forward guidance. I don’t think the emergency meeting will hold.”

Media reported last November that eight positions in the 12-member committee were vacant, making it impossible for the committee to form a quorum.

Media had also reported about a fortnight ago that the Senate was not budging on its resolve not to consider the MPC nominees.

The lawmakers had maintained that they would not confirm any nominee by the executive until the impasse regarding the nomination and non-confirmation of the acting chairman of the Economic and Financial Crimes Commission (EFCC), Mr. Ibrahim Magu, was resolved.

The lawmakers also said the Senate had resolved to seek a legal interpretation of a comment made by Vice-President Yemi Osinbajo that the position of the EFCC chairman did not require the confirmation of the Senate, as it was not specified in the constitution.

As a result of Osinbajo’s remark, the Senate had resolved to suspend the confirmation process for all nominees of the president not specifically mentioned in the 1999 Constitution, but are provided for in the establishment Acts of several agencies of the federal government such as the CBN, FIRS, NCC, and others.

Commenting on the decision by the CBN to issue forward guidance, the Director General of the West African Institute for Financial and Economic Management (WAIFEM), Prof. Akpan Ekpo, described it as a temporary arrangement, saying the central bank was in a dilemma.

Ekpo, who is a former MPC member added: “This so-called forward guidance is very temporary. It is an attempt to fill a yearning gap. But to me, it is not the best thing to do. But currently, the central bank cannot do anything, and you can’t blame the CBN for trying to find a way out.

“I wish this matter can be resolved. The stalemate is very sad. They are playing politics with the economy and it is very unfair. When you create uncertainty in the system, the foreign investors we are looking for may be discouraged. In most countries, the MPC is the engine room. If they cannot meet because of lack of quorum, it is very unfortunate.

“I thought the National Assembly should realise that they are not attacking President Muhammadu Buhari as a person, what they are doing is affecting the national economy.”

The CBN Governor, Mr. Godwin Emefiele, had last month announced that the benchmark monetary policy rate (MPR) was retained at 14 per cent, the cash reserve requirement at 22.5 per cent, liquidity ratio at 30 per cent, while the asymmetric corridor retained at +200 and -500 basis point around the MPR, as decided at the November meeting of the MPC.

He stressed that the central bank would remain proactive and vigilant in ensuring that macroeconomic stability was maintained.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.


Investors Oversubscribed for FGN Bonds by N205.87 Billion in October




FG October Bonds Oversubscribed by N205.87 Billion

The Debt Management Office (DMO) has said investors oversubscribed for the Federal Government’s October bonds by N205.87 billion.

The DMO stated this after concluding the monthly FGN bonds auction on Wednesday.

Two instruments of 12.5 per cent FGN March 2035 re-opening 15-year bond and 9.8 per cent FGN July 2045 re-opening 25-year bond were auctioned.

The two bonds of N15bn each with a total auction figure of N30bn received a subscription of N235.87bn.

The 15-year tenor and 25-year tenor bonds received 99 and 67 bids but recorded 21 and 26 successful bids respectively.

The amounts allotted for each of the bids were N20bn and N25bn respectively.

According to the DMO, successful bids for the 15-year tenor bond and 25-year tenor bonds were allotted at the marginal rates of 4.97 per cent and six per cent respectively.

However, it added, the original coupon rates of 12.5 per cent for the 12.5 per cent FGN March 2035 bond and the 9.8 per cent for the 9.8 per cent FGN July 2045 bonds would be maintained.

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Lafarge Africa Sustains Growth in Third Quarter, Reports N53.3bn Revenue



Lafarge Africa

Lafarge Africa Grows Revenue by 31.4 Percent to N53.3bn Revenue in Q3 2020

Lafarge Africa Plc, a cement manufacturer headquartered in Lagos, sustained its strong growth in the third quarter (Q3) ended September 30, 2020.

In the company’s financial results released on the Nigerian Stock Exchange on Friday, the cement manufacturer’s revenue rose by 31.4 percent from N45.172 billion posted in the third quarter of 2019 to N59.337 billion in the third quarter of 2020.

Similarly, operating profit grew by 7.2 percent from N7.746 billion in the corresponding quarter to N8.302 billion in the quarter under review. This strong performance continues across the board as net income expanded by 2.8 percent to N4.867 billion, up from N4.734 billion posted in the third quarter of 2019.

Lafarge earnings per share rose by 2.8 percent to 30 kobo in the third quarter, again up from the 29 kobo posted in the same period of 2019.

On the outlook for the company going forward, the company said:

 Market demand is expected to remain strong in Q4.
 Naira devaluation and inflation remain a concern in Q4.
 The implementation of our “HEALTH, COST & CASH” initiatives would continue to deliver
improvement in our performance.
 We will maintain a healthy balance sheet.

Speaking on the company’s performance, Khaled El Dokani, CEO, Lafarge Africa Plc, said “Our robust results for the first 9 months reflect the strong recovery of the demand in Q3 and the successful implementation of our “HEALTH, COST & CASH” initiatives. Both have delivered considerable improvement in recurring EBIT, net income and free cash flow, despite the impact of the COVID-19 pandemic and Naira devaluation, particularly in Q3.

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Despite COVID-19 Pension Assets Hit N11.4 Trillion



pension funds

Total Pension Assets Expand to N11.35 Trillion

The National Pension Commission has revealed that the total pension assets rose to N11.35 trillion as of the end of August 2020 despite the COVID-19 pandemic that disrupted businesses and economic productivity.

According to the latest figures from the National Pension Commission,  the commission assets expanded from N11.08 trillion in June 2020 to N11.3 trillion in July.

The report noted that 66.27 percent or N7.51 trillion of the funds had been invested in the Federal Government’s securities.

While some of the funds were also invested in domestic and foreign ordinary shares, corporate debt securities, local money market securities and mutual funds.

In the commission’s second quarter (Q2 2020) report, it said that following “the issuance of demand notices to some defaulting employers whose outstanding pension contribution liabilities had been established by recovery agents, 16 of the affected employers remitted N261.33 million during the period.

“PenCom said this represents a principal contribution of N152.79 million and penalty of N108.54 million during Q2 2020.”

In the commission’s Q2 2020 report, it said “the pension fund administrators (PFAs) 2,839 contributors under the micro pension plan, remitted a total of N7.4 million to the RSAs as pension contributions.

Also in the same quarter, it said the PFAs recaptured 56,990 RSA holders and uploaded their data to the enhanced contributory registration system (ECRS).

PenCom further said the growth in the industry’s membership was driven by the RSA scheme, which had an increase of 41,147 contributors, representing 0.46 percent.

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